Krystal Biotech, Inc. (KRYS) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Jeune Aesthetics and Krystal Biotech call and webcast discussing from the second cohort of Phase I PEARL-1 trial of intradermal KB301 for the treatment of aesthetic skin conditions. [Operator Instructions] Today's call is being recorded. At this time, I would like to turn the call over to Krish Krishnan, Chairman and CEO. Please go ahead.

Good morning. Thank you for joining us today. We're going to be reviewing the second cohort of the PEARL-1 trial of intradermal KB301 for the improvement of skin quality, which we announced earlier this morning. Next slide. As a reminder, this presentation will contain forward-looking statements based on our current expectations and beliefs. Such statements are subject to a number of risks that could cause actual results to differ materially. We refer you to our SEC filings for further information. Next slide. So we here at Jeune and Krystal are excited to talk to you all about this morning's results. After my introductory comments, I will turn it over to Dr. Bhushan Hardas, President of Jeune Aesthetics Inc., who will walk you through the trial and results. We'll then be joined by Dr. Steve Yoelin, a distinguished aesthetic medicine researcher and clinician and one of the investigators in our trial, to provide comments on his experience in the trial and perspective on the technology. We'll then open up the call for Q&A, which will include those I just mentioned as well as Suma Krishnan, the President of R&D and Co-Founder of Krystal Biotech. Next slide. So now on to this morning's exciting news. Next slide. To help set the stage, I'll remind you all, skin aging is a complex process caused both by intrinsic factors like the passage of time itself and extrinsic factors like the sun, the cigarette smoke, the pollutants, et cetera. From a biological perspective, it's well established that collagen, elastin and other structural proteins play an essential role in maintaining a healthy dermal matrix in younger skin. Dermal fibroblasts and keratinocytes primarily produce these proteins, which are secreted and then they undergo cross-linking, and ultimately get incorporated into the extracellular matrix, which is essentially the scaffolding at the dermis. So a robust extracellular matrix is essential for cell proliferation, differentiation, migration, maintaining the quality and function of the skin, essentially, meaning the youthful appearance of skin that you see on the left of the slide. But as we get older, there's a depletion of these structural proteins, both by impaired production as the cells age and increased degradation from the previously mentioned extrinsic factors. Ultimately, the dermal matrix loses protein content and volume leading to the characteristic signs of an aging skin as depicted to the right of the slide. Next slide, please. As you all probably know, the market for treatments that help to address the appearance of aging skin is large. It's a multibillion-dollar industry, driven by some main modalities. Energy-based devices like lasers, they damage to induce a wound healing process in an attempt to increase the production of these structural proteins. Derma fillers add volume, which work primarily by stretching the skin and masking the appearance of deep wrinkles or deeper wrinkles. And finally, the toxins, they paralyze the muscle to mask the appearance of dynamic wrinkles or wrinkles that happen a lot due to facial movement. None of these directly address the underlying biology of the aging skin. So that's where Jeune Aesthetics comes in. So using the STAR-D gene delivery technology that some of you are already familiar with, which is based on a technology developed by Krystal Biotech, Jeune is working to create a new category of aesthetic medicine. The technology is the first of its kind and enables a targeted gene-based approach to anti-aging. It is designed to give aging cells the genetic template to resume or increase production of the key structural protein to fundamentally address and potentially reverse the biology of aging skin. Next slide, please. So the first program in the Jeune pipeline, KB301, is designed to increase the production of one of these important structural proteins, type III collagen or COL3. Collagen III makes up about 20% to 30% of the protein content in the skin, and collagen III appears early during the process of collagen fiber formation. The subsequent replacement of this collagen III by another type of collagen, collagen I, is a critical step for collagen fibril maturation and extracellular matrix reorganization. Collagen III has been shown to regulate the dimensions of COL1 fibers, enhance COL1 elasticity and provide tensile strength. In addition, COL3 is also thought to play a more active role in the extracellular matrix more broadly, with evidence to suggest that it influences other functions such as cell adhesion, migration, proliferation and differentiation through its interaction with integrins, which are essentially cell surface receptors. Next slide, please. So KB301, our lead candidate, is designed to deliver 2 copies of the COL3A1 gene, which provides instructions for making the full-length human collagen III protein. It's injected intradermally after which the STAR-D vectors deliver the gene, the nucleus, where the cell zone machinery is used to transcribe and translate that gene into the human protein, which is then secreted and can be processed and incorporated into the extracellular matrix with the goal of rebuilding the ECM and reversing the decline in collagen III, which is observed as skin ages. With that, I'll turn it over to Bhushan to walk through the Phase I trial and this morning's data update.

Thank you, Krish, for introduction of the technology. So we now look at the product itself, KB301. And then in the next slide, first, we wanted to do a lab experiment where we wanted to see will there be an equal amount of production in younger fibroblast as compared to the aging fibroblast. And the experiment here shows in the bar background that young fibroblast actually produced higher amount of collagen III as compared to the older fibroblast. And then the obvious question was, if we treat this older fibroblast with KB301, will they have internal machinery to produce high amount of collagen III, which is either equivalent or higher so that we can have robust extracellular matrix. I mean this experiment, it actually does show that when we treat older fibroblast with KB301, it actually produces very high amount of collagen III, which was very promising. Now going to the next slide. Once we had that result, we wanted to replicate these in the human itself and at the same time look at the safety data. This data is already published and the poster is on our website, so please go have a look. The take-home message here is as we increase the dose, you see increased amount of expression of KB301. At the same time, the very important message that we got from here is we can actually treat multiple times, at least 2x in this experiment, and the product still does work. And this has been a very important step because many of the gene therapies don't do this. So having all that data behind us, all that understanding about the product behind us, we thought it would be the right time to do cohort 2, which comes on the next slide. Here, we had a hypothesis that KB301 will improve extracellular matrix on the aged or photo-damaged skin, thereby improving skin quality attributes such as fine lines, texture, thickness. And eventually, this will have an effect on quality of skin, tensile strength of the skin as well as other younger-looking characteristics of the skin. In this study, we had 27 subjects. Randomization was on site. In the diagram, you can see active either on the upper cheek, lower cheek or knee. Same thing, placebo on the lower -- on the knee, lower cheek or upper cheek. Because it was 2:1 randomization, some subjects also got active on one -- both sides. But no subject got placebo on both sides. And that is very important. The study was conducted in 2 sites. Primary goal was to establish safety because this was the first time we were going to inject gene therapy in the face. And we had to be very careful from a safety perspective. So that was our first goal. And the second efficacy measurement was, we are in the process of developing Jeune Aesthetics Skin Roughness scale and Jeune Aesthetics Fine Lines scale. Both of these scales are adoption from the 2 scale I published in 2016 which were for fine line and texture. We also looked at subject satisfaction as well as thickness of the skin just over the knee. So go to the next slide, we look at the baseline characteristics of what patients are included. So all in all, we had 27 subjects enrolled, out of which 23 completely completed the trial. As usual, in any aesthetic trial, we had more females than males. Average age in this particular trial was about 65.1, which, I would say, about 10 years older than what you see normally. This was primarily because FDA had asked us to look at extreme patients. We had Fitzpatrick type II and III primarily because to look at the injection site reaction, this skin type is much more easy to evaluate as compared to the higher Fitzpatrick, but this technology we know will work on any Fitzpatrick type. Again, from an entry criteria, we were trying to get moderate to severe and extreme patients in our trial for fine lines. So when the recruitment was completed, we had majority of the extreme and some of the severe. Same thing we noticed in texture also. And I think we did talk about that 27 subjects were included and 23 completed. None of the trial were dropped out because of the concerns for the AEs. Now look at each region separately. First, we look at the knee. And if you look at the Slide 15, the first visit was primarily to look at skin sensitivity. This was done behind the ear, and the patient was called in after 14 days just to see if there are any injection site reactions there. If they passed, they went into the further treatment. So the treatment schedule here was 1 ml of low-dose KB301 was injected with 33-gauge needle, which is a very fine needle, in the skin just above the knee. Again, this area of the skin is very thin, and we use that as a model to look for if we can increase the thickness of the skin. The only anesthetic that was used at this time was numbing with ice. There were no other anesthetics used during this procedure. The first treatment was on Visit 2. Second treatment was on Visit 3, and evaluation was done on Visit 5. We, as usual, looked at the safety and tolerability throughout the trial, injection site reactions were looked at during the injections, that is Visit 2, then Visit 3. Subject satisfaction was done independent to right and left every time. And we had skin fold measurement that was also done at the baseline and Visit 5. We also had global assessment of improvement done by the investigator, and that was a binary question. So if we go to the next slide, we first look at the safety. And here, we are looking at the injection site reaction. This is very impressing. All injection site reactions were mild, and they all were resolved in due time. On the Visit 2, we had about 45 injection site reactions. Visit 3, which is the second treatment, that went down substantially to 11. And a placebo, you have 2 and none. This is very important because collagen III is so important for wound healing, probably that is causing reduction in the side effects -- injection side effects, which is a very important observation. When we look at the next slide, we are looking at the efficacy, mean improvement in subject satisfaction, investigator assessment and thickness of the skin were all positive, thereby, there was a separation between active versus placebo. Subject satisfaction, it was higher in KB301, much lower in placebo and the difference was about 21%. And odds ratio was very strong, close to 3. When you look at the investigator assessment, it's the same thing, the KB301 came out very high as compared to placebo, and the odds ratio was 2.4, which is very telling. When we look at the skin fold, in this particular protocol, we said increase of 1 millimeter and higher will be considered as relevant. In this particular case, the percentage response we got about 45 and 33. That means a very good separation between active and placebo, with an odds ratio of about 1.7. But really interesting thing is when you look at the mean change or the difference of a mean change between active and placebo, it was close to 1. And this is a slam dunk that we know we can definitely increase the thickness of the skin away from the face by this product. So now let's have a look at the pictures. They are extremely telling. You see a baseline versus Visit 5. On a baseline on the lower right side, you can see the folds, very prominent one, they are completely gone because the skin has gotten thicker and then it has reduced the fold substantially. And you can see that all over on the lower side of this diagram, within the dotted lines. And on the dotted lines on the top, you see much more smoothening out and loss of texture. This is very important because it not -- has an aesthetic effect because it is thinning -- thickening the skin, which is very important. When you look at the second picture, the subject was slightly older and had much more crepey skin, but when you look at the Visit 5, it has plained out much more. It is like ironed out much more and many of the major lines have actually vanished because the skin thickness has gone higher. So this is the very interesting and extremely important observation. So now let us look at lower cheek. So the lower cheek treatment scheduling was 1 ml of either low or high dose was injected into the lower cheek with 33-gauge needle. And here also the anesthetic that is used is only numbing of the skin and no other anesthetic or diversions were used at all. First dose or the first treatment they received on Visit 2, then Visit 3 was second treatment. Subsequently, third. And then there was an optional treatment on Visit 5 and efficacy was done on Visit 6. If we look at the generalized safety and tolerability all around during the protocol, injection site reactions were actually major after every treatment or every injection. Then we had subject satisfaction, this is also -- was stratified, means you can have subject satisfaction on the right side and on the left side, that was done during this trial and the skin texture score and fine lines score, as I told you, the scales are still in the developing phase and not as sensitive. But they were specifically designed for the lower cheek area so that we can have a meaningful analysis on this case. So let us have a look at the injection site reactions because this is very important. About 91% of the injection site reactions were mild, which is phenomenal. And only 9% of them were moderate. The moderates were bruising, swelling and tenderness. And they actually went away in due course without leaving any side effects, long-term sequelae. On the first treatment, we had about 32 incidences; second one, 17; then 9; and on the 5 again, 10. Basically, what this is telling again that as we keep on repeating the treatment, the second, third and fourth actually has less number of side effects. This is same, and the hypothesis is because of collagen deposition. And the placebo side, there were much lower side effects, which was very much expected. So now when we look at the subject satisfaction score, we had to divide this in the higher and low. In a high dose, you see a clear separation of subject satisfaction on Visit 5, which goes slightly higher on Visit 6. But the placebo effect stays pretty much the constant. That means there is a definitive separation from placebo, and there is an efficacy in subject satisfaction at the higher dose. We could not see that in the lower dose, as you can see here, because it was pretty much flat. So it basically tells us that the higher dose subject satisfaction has definitely worked. So when we look at the scales, the review was done by a third-party blinded reviewer, and he scored on Jeune Aesthetics Skin Roughness scale as well as Jeune Aesthetics Fine Line scale. If you look at the high dose and a low dose, overall there is not much of a separation between the high dose and low dose versus placebo. To me, this is primarily because there were only 23 subjects and evaluation was done on 17 and 12. 9 and 6, we saw a very low number. The scale is not sensitive enough, and it actually not completely validated on its score. But at the same time, the effect we got is very remarkable and actually telling, in total, definitely [ astute ]. One more observation that came from a blinded evaluator, which was very important, is moderate improvement in skin laxity. This is very important because we know if the matrix is healthy, elasticity, tensile strength has improved. And we see that in the trial -- in this trial, and I will show you in one of the pictures. There is an improvement in solar dyschromia, the redness and other pigmentary disorder. And we can see that also as well as improvement in telangiectasia. These are all the signs of the downstream effects of collagen as it improves the quality of the skin. So now next slide, just have a look at the picture. So this was a patient. She got injected on her right side, the high dose, and she got the whole treatment. She was also treated on the upper zygomatic arch, and we kind of mentioned that because it's very important here. So when you look at the picture, which is baseline, which was no treatment, you can see the skin is lax. It actually does show a pigmentation and it shows multiple fine lines and roughness. When you look at the same patient at Visit 6, after complete treatment, you can see there is increase in elasticity, thereby, you can see the skin has gone tighter. There is loss of texture and fine lines in the lower cheek. But actually, if you look at the -- her, on the upper cheek, you see the same thing. There is a substantial loss of fine lines and texture on the upper cheek. I have to mention one point here, which is very important, and we did not measure it, but every patient that it worked came and told us that their face looks more luster. Somehow it is much more shinier, and it kind of tells in this picture that you see on the zygomatic arch, you do see some shininess. So have a look at the same patient in the next slide. When we look at her right side was treated and her left side was not treated, trust me, she was not very happy because she looked remarkably different. Her right side looked very similar to what we have seen in the past -- sorry, left side looked very similar to what we have seen in the past where it was not treated. Here, it is treated with placebo. It has not made any change. But on our right-hand side, it was treated, and you can see the difference between the treated with active and treated with placebo, and this is very remarkable. So there was this third patient that we would have a look at in the next slide. This patient, when you see the baseline, she had dyschromia, fine lines and texture on the area that has been demarcated with the dotted lines. But you also see an arrow. This is the line she was extremely worried about that she could never get rid of with anything. And this was a fairly deep line, was an expression line, which she was primarily worried about. And in this patient, when we treated her on the Visit 6, you can see the dyschromia has actually gone down, the fine lines have reduced substantially, the texture has gone much more smoother. And I think the remarkable thing is actually that line that she was worried about has completely vanished. She came to us with a big smile and said that the right cheek significantly improved from the last visit, one wrinkle completely dissolved. And I think when patients see that, they are beyond happy because they've been trying to get rid of these lines, which are very difficult to. And I think this is a very good news for our technology. So let us have a look at the upper cheek. The treatment schedule for upper check was 0.5 ml of low dose of KB301 was injected with 33-gauge needle. And the only anesthesia that was used at that time was also ice and numbing with the ice. The first treatment on the upper zygomatic arch happened at the Visit 3; second, at the Visit 4; third at the Visit 5; and then there was an optional treatment at Visit 6. Again, the safety and tolerability was looked at during the protocol. Injection site reactions were evaluated after every injection. Subject satisfaction score was done on every side separately. Blinded independent evaluator assessment, there was no existing scale for this particular area, and clinically meaningful improvement was not really well defined and we just relied upon the physician's assessment. So when we go to the next slide, we look at the injection site reactions in the upper zygomatic arch. Majority of the events were mild, 2%. In this case, only one swelling, which was moderate. And you see, again, the first injection, we had about 19 incidences; second injection, about 11; then 14; and then 5. Again, the number of incidences keep on going down. And when you look at the placebo, they were very, very low, 1 and 3. And to me, this is the very important part. Now let us look at the efficacy. The first thing that we looked at was subject satisfaction score. It was done on Visit 5 as well as Visit 6. You do see there is a definite separation between active and placebo. This is only lower dose. And I think this is very telling that there is efficacy in a subject satisfaction score as compared to the placebo with low dose of KB301 in these subjects. The clinical improvement, as I said before, was performed by the blinded independent reviewer on pictures, but there was no scale present. And we also did not stratify as to what is improvement and what is not. So the results that we got from that was nonconclusive, which is understandable. But when we look at the pictures, so go to the next slide, we are looking at the area of upper zygomatic arch which we have injected. It is shown on the dotted line here. On the baseline picture, if you can see, there is a lateral canthal line, which is coming up. You can see it is literally upward -- lax, and it's actually folding over and creating the line. At the same time, the texture around that area is very rough. When you go down on more of a malar area, you see all the fine lines that are running, and when you come closer to the nose, you see the texture that is really bad. This patient was injected. And on Visit 6, we took a picture. When you look at it, the lateral canthal line actually opened up, not because it has been treated, because the elasticity of the skin has improved. The drooping of the skin above has completely gone away. The skin looks much more smoother and the texture has gone, improved. And all the fine lines that you saw here parallel running down, they are completely vanished. And the texture, probably not got so well improved, but we also see some [ defect inside ]. This was a very promising result. When we look at a second patient in the second -- next slide, we also see this lady had very marked lines underneath her eye. She had a texture, and actually near the nose, which the pore size were really high, there was a lot of dyschromia. And at the same time, her lateral canthal line was very, very prominent. And one thing I want to say here is we did not inject very close to these lines. But because injecting it around, it actually improved the elasticity of the skin, it gave its improvement in the texture -- lines itself. So when you look at the Visit 6, this is remarkable. We see that glow that I was talking about before, you see it here also. The lateral canthal line actually completely resolved, mostly because of increase in elasticity. The texture has gone down really, really smooth. And when you look at closer to the nasal area, this is very hard to treat with anything else, but the pore size which bothers most of the patients the most has completely gone -- resolved. And this was the really, really major observation which the patient was extremely ecstatic about it. So look at the same patient. On the right side, that she was treated with KB301 low dose. On the left side, she was treated with placebo. And honestly, where she was treated with placebo, it looks very similar to before picture in the past. And the after picture here is actually much, much better. Obviously, she was not very happy, and we will have to correct her later on. So to summarize, repeat administration of KB301 is well tolerated across all 3 areas. And we know in all 3 areas, the second, third and fourth injection actually showed less number of side effects, injection site reactions as compared to the first one. This also tells that the drug is working from a healing perspective. The systemic side effects, we actually did see. There were 4 patients who complained about mild body ache. There were 4 patients who complained about mild fatigue. There were 2 patients who had mild headache and 2 of them had mild chills. Trust me, the trial was conducted in the summer -- wintertime, so it was really hard, but all of these things were resolved pretty fast. We had one subject that told us they had a moderate muscle pain on the side -- one side of the body. And when we actually looked at what was injected on that side of the body, it was a placebo. So obviously, it has nothing to do with the drug itself. So when it comes to treatment of KB301, it has demonstrated that clinical benefit versus placebo, an improvement of subject satisfaction in all 3 areas of the placebo, and I think this is as compared to the placebo. To me, this is a very important point. FDA pays more importance, mostly in aesthetic patients, what patient feels. Because in this scenario, patients are coming to you with a diagnosis and then they have to be satisfied. So that is for FDA is extremely important. So in this case, we have shown the subject satisfaction has been achieved in all 3 areas, and that is a really positive signal for us. Above the knee, not only subject satisfaction, but we know investigator assessment has shown efficacy as well as thickening of the skin, which is very good objective measure that we have achieved. So there are many other areas that we could take this particular learning that we could actually thicken the skin on the body. And some of the things that come to my mind is back of the hand or décolletage or even area above the knee. So utility of this product to be used in multiple indications is sky is the limit. So now when we look at the lower cheek, Skin Texture and Fine Line scores, though because of the infancy of the scale, have not shown any remarkable difference. But when you look at the pictures, they are really telling. Yes, there is definitely improvement in fine lines and texture as well as elasticity has improved, which is very good. At the same time, we have also seen some downstream effect improving such as solar dyschromia, telangiectasia as well as laxity of the skin. This is a very important and very major observation that we have, and this will definitely be explored further. As we know, in the lower cheek, only higher dose work and not the lower dose. When we look at the upper cheek, again, subject satisfaction, as we saw before, has worked really well. And the pictures definitely show that there is improved elasticity, the reduction in fine lines and texture, at the same time, some of the dyschromia has actually improved. And this basically tells us that all 3 indications have worked and should be taken into further investigation. So now on Slide 37, let's have a look at what is the impact from a marketing perspective. So today, what we see that the global facial injectable market in 2020 is $13 billion. It is expected to be raised to $26 billion in 2026. And body market is about $18 billion in 2018, and it will go up to $50 billion in 2028. Our technology and our programs are way too early to see how much of this market that we can achieve, but at the same time, the numbers are pretty substantial. So now look at what are the next steps? The very first thing that we are doing and including our trial is already ongoing is the durability. All the subjects which were injected in the Phase II cohort will be rolled into a durability trial. There, we will have a look at how long the duration lasts. It will be an open-label study with 2 sides, and patients will be injected only on the side where they got a placebo to make their face look even. This will be primarily a lower cheek trial. There will be 6 total visits, and duration of this trial will be extended depending upon how the durability -- how long the durability is. We will be looking at the safety and tolerability as such. Long term, we will look at the Skin Roughness and Fine Line scores. Subject satisfaction will be also taken into account. So moving forward to the next slide, what are we planning to do as far as Phase II? So we will initiate 3 Phase IIs in late 2020 and early 2023. One will be on the lower cheek, one will be in the upper cheek, and one will be behind the hand for aesthetic improvement of the hand. And when we look at our pipeline, we have a really strong, robust pipeline. KB301 has proceeded. It is going to the Phase II. Elastin, which is how we know the holy grail, it is IND-enabling, and we should have Phase I in early 2023. We have added collagen IV on the purpose that collagen IV and collagen I are really responsible for having extracellular matrix in subcutaneous tissue that they are in preclinical, and we'll be moving them forward in the future. I will now hand over the call to Dr. Steve Yoelin, who was one of the investigators who actually performed this trial. And he will give us his opinion on the trial.

Thanks, Bhushan. As mentioned, I'm a board-certified ophthalmologist by training, though I now focus on aesthetic medicine. During the past 2 decades or so, I've been involved in dozens of clinical trials from Phase I through Phase IV with various neurotoxins, dermal fillers, fat reduction injectables and other facial injectables as well as other facial drugs. Additionally, I have trained other clinicians through at least 2,500 industry-sponsored global training programs and hundreds of continuing medical education, CME programs. I also strongly commit my own injectables-focused private practice in Newport Beach, California, which I have grown almost exclusively by repeat visits and word-of-mouth referrals to reach a multiyear wait list that exceeds 1,000 patients. In fact, we're booked out for the next 2 years. As an investigator in this study, I can anecdotally report that the tolerability profile that I observed was very much in line with the overall data presented today and consistent with what I would expect to see with other injectable procedures. Also, anecdotally, several of my patients noted that their faces felt noticeably uneven as demonstrated earlier after treatment and were eager to enroll in the longer-term durability study that Bhushan just mentioned, which would allow them to receive KB301 on the other side or opposite side of their faces. The results that were shared today are groundbreaking in my view. As we think about skin quality and the improvement that could be possible with a treatment that truly rebuilds the architecture of the dermis to address the fundamental biology of aging, there really isn't anything currently on the market that can precisely do that amongst all of the commercially available options that have been treating symptoms by masking the aging skin. And I believe that the future of aesthetic medicine lies in treating underlying problem itself. And so I'm excited, very excited actually about this gene delivery technology and KB301 because it is uniquely positioned to address aging at its source, to increase the production of collagen and eventually other key proteins like elastin, in order to hopefully deliver results that are different and very complementary to what can be done with commercially available products. This data is an exciting step towards demonstrating that potential. And while I do not think of this approach as complementary to current options, there is no doubt in my mind that, over time, a treatment that addresses that biology in this type of manner can change the way what practitioners think about aesthetic medicine dramatically. KB301 has the potential to enable practitioners to manage not just the look of aging skin, but the process of aging itself. With that, I'll hand it back to the Krystal team. Thank you very much, everybody.

Thank you, Dr. Yoelin. That concludes the formal presentation. I'll now open the call for Q&A.

[Operator Instructions] Our first question is from Alec Stranahan with Bank of America.

Two from me. On safety, did any of the mild AEs, such as the bruising or swelling worsen upon additional doses? Or were they -- most of the AEs seen mostly upfront? I'm just trying to get a sense of the sort of cumulative effect of repeat dosing. And then secondly, obviously, harder to show physical changes in aesthetics versus diseases such as DEB. So as you're planning your Phase II, wanted to see if you've gotten any clarity on what could be your potential registration-enabling endpoint? I know you talked briefly about your internally developed rating scales, but any other details on those outcome measures or any feedback from the FDA would be great.

Thanks, Alec. I'll have Bhushan answer the first question and then hand it to Suma to talk about the FDA process. Bhushan?

If I'm understanding you right, the question was were there any carrying over of the AE from one injection site to another, right?

Right.

Generally, all AEs were resolved, then only they've got treatment the second time. So the time period in between treatments was 14 days. That was on purpose because all the AEs, injection site reactions that were there with the first treatment have completely resolved, then only they got our treatment on the second time.

If I can add some more color to that. I think if the question was with repeat administrations, did you see tolerance to the administration? And that's exactly what we saw. As Bhushan said, with the initial injections, you see the onset of some administration site reactions. But with repeat administration, the injection was tolerated and you saw a reduction. And at the second and third injection, almost -- the AE was completely -- you do not see any AEs. So again, you see tolerance with repeat administration. I hope that addresses your question. With regards to registration, I mean, again, I think from a company perspective, we are very pleased that the FDA has even allowed us to proceed with this technology into aesthetics. So that's a big win. I mean, again, as Bhushan mentioned, the only requirement from the FDA was for the Phase I study for us to really go into patients that were very severe because of the gene therapy approach for aesthetics. And that's exactly what we did. As you see, the average patient population was 65.5 age, and this is one of worst age population. If you look at other aesthetic studies, the average age is much younger, in the 50s. So we believe that even with this extreme patient population and very severe wrinkles, that we see pretty good promising results. We are very -- I think this looks -- this is promising. So I think going forward, I think we have very -- many different options, as Bhushan said because we see improvement in the lower cheek area, in the knee area. So I think we need to internally discuss what indications that we want to prioritize. And then depending on that, I think once we finish this, we'll have a meeting with the agency and decide on the indication and develop appropriate scales to satisfy that indication. So we have a lot of options. It is a good thing. But again, I think we'll decide which particular indication we need to move forward based on the data that we have.

Our next question is from Raju Prasad with William Blair.

Dr. Yoelin said something about -- that this approach not being complementary to the current standard. I was just curious if you could clarify that comment. Does he mean that it's a different approach? Or is it potentially kind of -- could take over? That would be great to start.

So let me clarify, Prasad, thank you for your question. And what I would say is right now, my practice is just injectable. I don't use devices. We're just so busy just with injectables. And we've gotten very good with injectables, but this is a whole different [ regimen ]. One of the things that I think is really needed in this space is just improved skin quality, not just in the face but the rest of the body. And we're still searching for something like that. So in a sense, I would say this is a new category, and that's really what I meant by that. That being stated, I still think neurotoxins or neuromodulators and dermal fillers like Juvederm and Restylane will always be important. There's no doubt in my mind. So even though this is a new category and something that we've been waiting for long, and in fact I can't believe it's actually here. And as an investigator, I was honored to do this study. So I would say it's a category in and of itself, and that's what I really meant to say. But that being stated, it will be complementary to the existing products. So it's not going to really compete at all. It's complementary, too. So it just expands our ability to get better results, not just of the face but the body, too. So I hope my comments now make a little bit more sense to you with regards to the statements I just made.

Great. Yes. That's helpful. And then maybe just a follow-up to that. Maybe Bhushan, if you could talk a little bit about indication selection, and obviously, the Phase II trial as well as potentially moving forward based on durability profile. That would be really interesting to hear how you're thinking about attacking the aesthetics space in the longer term?

Yes, I say that's a really good question. Durability is extremely important, and we are -- initiated that trial, and we will know -- we will have some data from the patients that we have as to how long does the effect last. And I think that's very important. Once we get the answer from their trial, we will have an announcement. In the Phase II, I think it was very deliberate when we had 3 areas that we wanted to examine in this proof-of-concept trial, lower cheek, where today we know there is no injectable available to take care of that space; upper cheek, primarily is there's also nothing there from a surface perspective given there is something for tear trough, there is something for crow's feet, but there is nothing for the skin quality around that area. And then thickness of the skin. And I think there, back of the hand, I've done that trial in the past. There is already a predicate. So that could be a very easy indication for us to go, and that's a huge market. And if this product is taking care of the secondary photo damage signs and symptoms, for a hand, it would be extremely humongous because dyschromia in the hand is really, really bothering to many, many people. So to me, we will categorize in a way that lower cheek, we need to do some work. For the upper cheek, so that will come afterwards. But the hand is something we can go straight away because there is already an FDA predicate available.

And I want to build on what Bhushan said, I'll make this very, very quick. And in aesthetic, I've been involved in this stuff for like I said, over 2 decades, and what happens is all we really need is like one indication, honestly. And then we're very creative as a group, this group of aesthetic providers, and it's dermatologists, facial plastics, plastics, med spas, I mean it's massive, and it's multi-specialty. Suffice it to say, we just really need one indication that kind of reminds me of fillers with nasolabial folds. So we went to nasolabial folds very quickly to lips and to cheeks and to chins. And all these areas were explored by us prior to the large strategics getting involved. So I think all you really need, honestly, is one indication, and we'll take it from there. That being stated, I think that the more indications the better eventually. But I think early on, I think, take sort of the path that's probably easiest and the hurdle that's easiest to jump over.

Just maybe one little follow-up. You mentioned durability, what would you say is the bar for durability here? I mean you mentioned that you're going after indications where there's no approved products, but I mean, would you consider kind of the neurotoxin 6- to 12-week kind of durability or longer would be kind of your hope or your bar for success in moving this into a bigger Phase III trial?

Yes, Bhushan, and I'd like Dr. Yoelin to comment on it, too.

Yes. We know half-life of collagen protein once it's cross-linked and if it is not degraded by external factors, it's about 14 years. So in this particular technology, we actually deposit that collagen, and we expect it to last for a longer time. I'm not saying it's going to last for 14 years, but it will last for a long time. And that is something we need to really evaluate in our clinical trials as to how long this is up. If you ask me really, because I've been working on this for more than 6 months, I can tell you, I have seen patients who were injected in November, and they still look pretty good.

That's great. And you guys can call me, Steve, if you want to. So building on what Bhushan said, these are patients -- the patients who had enrolled in this study are -- were my patients for a long, long time. That being said, I've been injecting Botox and products like Botox now for a long time. And the duration of effect is about 3 to 4 months with our current dosing strategies. I think with increasing the dose, you can get a little bit more durability. But that would be the bar, honestly, is about 3 to 4 months. If you can reach the 3 or 4 months when people are willing to come in and get reinjected, now if you get more than 3 or 4 months, that would be ideal, but that's probably the minimum because patients are already coming into the practice every 3 or 4 months, they come into our offices about 3 to 4 times a year. And that's acceptable. Clearly, that market has taken off and continues to do well. So that's what I would say. That's your bar. And my hope is that you'll get greater duration, especially with increasing the dose here. And once again, I can't really talk about this enough. And that's the fact that we really don't have anything else that comes close to this. There's nothing. And so it's really kind of blue sky as they say. And so individuals to really receive improved skin quality, fine line, texture, decrease in the pore size, which is a massive surprise to me, is so valuable. People will do -- basically do anything to improve the quality of the skin of their face and their bodies, too. So the bar 3 to 4 months, yet maybe less, who knows because it's really addressing an unmet need. My hope is that we'll get more than 3 or 4 months though.

Our next question is from David Hoang with SMBC.

Great presentation this morning. I had a couple. So I wanted to just ask about the patient maybe baseline expectations as to improvement. So it sounds like these patients are experienced with past treatments, whether that's neurotoxins or dermal fillers. Do you think that sort of influenced how they interpreted the outcomes? Meaning is it possible that patients are judging their responses based on their past experiences with existing aesthetic products?

I can take that question. The -- most of the patients, yes, you're right, they are used to having aesthetic procedure done. But I can tell you one thing, pleasing these set of people, and I'll call it women because primarily, they are women, it's not that easy. They know what they can achieve. They have achieved it in the past. They know what to expect. So really, it is not easy for them to tell you whether this is good or bad. They will never lie upfront. And I think they are not the easiest people to please, to be very honest. So if someone says that it has improved and it is doing much better, it really means.

Yes. And again, it's Steve. It's a really good point. So the patients that we enrolled in this study were veterans, if you will. So they have had neuromodulators, neurotoxins and dermal fillers before. They even had actually collagen stimulators in the traditional sense. I'm talking about products like Radiesse and Sculptra, which conceivably can improve skin quality, although that's really they've been proven, but they still are looking for that holy grail. They're looking for an improvement in the skin tone, quality and texture. Most of these individuals that use on my side were older. That being said, they'll do anything in order to improve even the smallest improvement of skin quality, in texture, tone, et cetera. And that being stated is oftentimes, they got results that we can see and that they could appreciate. One thing that I think is difficult to appreciate in these photos, but I think it needs to be stated here, and I was talking to Bhushan earlier about this, is that it's like something that's beautiful is very difficult to describe, but when it walks in the room, you just know it. And when people who were in this study would walk into the room, the photograph room or my treatment room, you could tell there was a difference. There was this glow. And I use the term glow because I think of someone who is pregnant. But in a sense, that's what they look like. They have this sort of glow, and you saw that a little bit on those 2D photos. But in the 3D view, which we see all day every day in the clinic, you can see that. And when we show that to them or other individuals in the office, our staff, and our staff happens to be very, very young, and they would make mention that, they say, oh my gosh, I really do see a change. And I think what happens, too, in the minds of these patients or subjects, they forget very, very quickly what they looked like before they entered the study. They just do. They have this reset. They do this with neuromodulators, they do this with dermal fillers. They even do this with surgery. They accept what they look like and sort of what they always look like, but that's not always the case. So I think you need to take all this into account. That being stated, this was really a groundbreaking study, as I said before. The results really were unexpectedly good and the patient population we took care of was a very difficult one, not because our expectations are very high. I'm in Newport Beach, so expectations are very high. But that being stated, these are individuals with lower Fitzpatrick scores. And so they tend to align a little bit easier. And being in their mid-60s, they didn't use sunscreen when they were small or in their adolescent years or even in their 20s. And so there was a fair amount of skin damage. So we're sort of like working with patients that are really a challenge to treat. But please keep in mind these are 2D photos that you looked at, so the 3D imagery that you didn't see. And also these were the toughest patients because of the skin damage that had occurred over time. And in addition to that, they're older individuals and they're very forgetful about what they look like at the time they enrolled in the study to the time they exited the study. So I think keeping those things in mind will be very helpful.

That's great. I appreciate the context a lot. I had one additional question just on expectations as you get into Phase II in terms of the patient population that you'd be seeking to enroll. Would you envision skewing towards perhaps a younger population that's more in line with the current aesthetics population? And by doing so, I mean, it's probably too early, but can you talk about any -- is there any expectation that those patients would perform better when receiving these types of products?

Yes. Primarily, the patient population that we have and the severity that we have, that was because what FDA asked us to do in this particular trial. In a Phase II trial, we will definitely have younger patients, not that severe patients because we know from our experience in the past, that those are the ones actually show much better improvement from a numbers perspective. So yes, moving forward, our patients will be moderate to severe. And obviously, when they are moderate to severe, the age group is much, much lower. That means the average age should be about 55, in 50s and not in 60s.

Our next question is from Josh Schimmer with Evercore ISI.

First, Bhushan, any chance that this benefit is a result of inflammation, kind of like a chemical peel as opposed to collagen deposition? And how would you prove one versus the other?

Okay. I'm glad you asked this question because there is no inflammation. Even if there is injection site reaction, that is a reaction towards the procedure, and that goes away within 3 days, right? So when it comes to a laser, radiofrequency or even the collagen-stimulating fillers, they are actually causing the damage and causing inflammation. In this particular technology, there is absolutely no inflammation per se, which is substantial enough that it's going to have any effect on collagen. The only thing we [indiscernible] we introduce the collagen STAR-D technology into the cells, and then they make the RNA, and then you make the protein, which is actually secreted outside and then gets cross-linked the way it should get cross-linked in nature. This is not collagen which is just deposited anywhere into the extracellular matrix. No, it actually does the biological function it is supposed to do. So I think it is a very different approach, and we actually see that now even clinically. And I don't think this is because of inflammation because I have seen many, many patients with resurfacing of their skin, and that skin looks very different. That looks very -- because that is where you have enormous amounts of inflammation feed. There's a downtime for about weeks. And that is a very different even look as compared to what we are seeing today.

I'm just going to add one more point. Sorry, this is Suma. In cohort 1, we really looked at mechanism. So we -- with cohort 1 in a number of patients, we injected into the buttocks both single administration and repeat administration. And then we biopsied the patients, so we gave one side the KB301, on the other side with placebo injected. And we looked at biopsy samples. And clearly, we see a dose response of transcript levels of collagen III. So we know that -- even with single and with repeat, so we know that the vector 301 does get into the cell and does produce collagen because it's code-on-optimized, it's specific to the vector. So we have already shown the mechanism. So the collagen is being produced.

And you have the swelling, soreness, redness, tenderness, erythema, I mean those all sound like some degree of inflammation, so what...

But those are primarily because of procedure. Any time you make a procedure, you will get that kind of -- that is expected to have, right? Because at the same time, you are inserting the needle and that needle is actually maneuvering inside your skin, and there will be some. If inflammation or any kind of redness or tenderness was because of the drug's inflammatory response, that would be much more [indiscernible], and it will not be only mild, it will be moderate to severe. So I think the inflammation that you see is because of [indiscernible] in the skin. And I think Dr. Yoelin has a comment to make.

Yes, really quickly. And I agree with everything that's been said. What was very compelling about our study is individuals showed a result within days of treatment. And I've injected a lot of Sculptra, I've injected a lot of Radiesse, which is when you see a foreign body reaction, and that will deliver a collagen response in these patients. But it takes weeks to see that change. And so what we saw here, we realized within days. And I think that's a big determinant and makes patients very happy. It's been a hard sale honestly. For the collagen stimulators that I'm aware of, you have to wait oftentimes 6 weeks to see a change. And the beauty of this particular drug is you see that change within days. And so I think that inflammatory response that has been discussed already takes a lot longer for you to see a collagen response that patients and that practitioners can appreciate. That's just what's in [ the future ].

Got it. And Steve, I guess not all patients responded to it, in fact the majority didn't. Is that an issue as you think about applying it to your practice? And maybe you can elaborate a little bit further when you say it is a complementary approach to other modalities, like where do you see it fitting in? Does it replace collagen stimulators? Does it expand use beyond that?

Yes. Let me talk a little bit -- it's a great question. I'll take the second portion -- I mean the second part of the question first. Maybe it's a little bit easier. Sort of the holy grail, what's left, I should say, with regards to aesthetic medicine is hair regrowth and then skin tone quality and texture and not just of the face, not just the neck, not just the torso, but the extremities, so the entire body. I think one of the issues that we face, especially with the older patient population is we can make their faces look pretty darn good with existing products. Skin quality maybe not so much. But the rest of the body looks old. And so you have this sort of like discord, you have this younger-looking face and older looking body, and these patients just don't look globally better. They just look different. And so what I would say in terms of complementary is what was true. The -- and I think Bhushan did a beautiful job talking about neuromodulators. But they really are about dynamic lines, lines that you see when patients move. I mean we can reposition brows or reposition lips to some degree. But in general, it's really about dealing with dynamic changes or muscle atrophy. That's the neuromodulators. So current fillers and [indiscernible] dominate the landscape here in the United States and the world, it's just about filling, filling static lines and filling depressions and maybe recreating a cheek or a chin that was once there, but is no longer there or actually enhancing or augmenting an existing cheek or chin or jawline, whatever it might be. But these products, as popular as they are, fall very short of improving skin quality. And I use Radiesse, I've -- this was introduced in the United States. It's been around for a long time. Even now hyperdilute Radiesse, and I use Sculptra since it was FDA approved here for HIV lipoatrophy. And so I know this product very, very well. And these -- those products are very, very unique and very different than this one. Oftentimes, there's cycles of treatment that's needed, and as I said before, in order to see a change, a meaningful change, you have to wait a long time, weeks for patients to see a change. After spending a lot of money at the time of the procedure, they'd like to see a change relatively quickly. I mean that's why dermal fillers are so popular in the U.S. because you can see a change right away. But with toxins, it may be 2 or 3 days. The beauty of this particular product in the patients that I'm aware of, especially the high dose individuals as we saw earlier today, is you saw a response really quite nicely that patients could appreciate in most cases, but observers could appreciate in virtually all the cases, that's been our experience, especially in the high dose group, especially -- and it's unfortunately, you didn't see these individuals in 3 dimensions, but I did. And what you see is this sort of luminescence. It's almost like expanding a balloon after treatment. And so obviously, patients respond differently to stimuli and that was certainly true in this particular study. But the individuals that we saw that received drug on one side versus the other were markedly unhappy, if you will, with the side that didn't receive the drug and can't wait for the study to be reestablished as we talked about that earlier today. But these things are complementary. When I say these things, the existing products would be very complementary to this product. I'm stating it in another way. And I think it will just grow our practices. And what it will do, honestly, it's going to bring a lot of individuals that are sort of sitting on the sideline into our offices because skin quality tends to be a big issue, especially the younger individuals that love their mom or their dad but don't want to look like them, at least not as quickly. And so I think this will be one of those things that individuals will grasp on to, especially the younger individuals who may not have dynamic or static lines that bother them, but they want to avoid skin quality issues that their parents battle with.

Our final question is from Madhu Kumar with Goldman Sachs.

I guess for both the doctor and for the company, how long into this -- you've noticed this kind of AE profile where the AE rates decrease over injections. How long do you think it will be until you reach either to a placebo level or like an effective plateau in terms of what the AE profile for 301s are going to look like? And then I have a follow-up after that.

So if I'm understanding you right, your question is how long will it take for the AEs to completely vanish as compared with the repeat dose treatment, right?

Or reach a plateau, whichever it is. First question is, do you think it will go down to the placebo rate? Or do you think it will plateau at somewhere else? And kind of how long do you think it takes to get to either of those outcomes? Whichever you think would be...

Yes. We saw that -- I think it is also very dose-dependent, like we see on the knee as well as the upper cheek, where we had the lower dose, there was a dramatic reduction in the incidence with the subsequent treatment, but the reduction in lower cheek was way dramatic because we had a higher dose there. And because we had a collagen, it actually went down. So to me, it is directly related. The amount of collagen which is produced by the first treatment or second treatment that will determine what should be the side effects profile given forward. To me, again, the small side effects because of teething of the skin or injecting the skin, they will still be there. But they will be minimal or literally easily manageable with something else. So to me, it will only time will tell us, but it's directly related to amount of collagen injected. And I think -- the way I'm thinking is tomorrow, if we get even higher dose, probably the second time we inject, the side effect will be a lot lower than what we have seen there because it's directly related to how much collagen you're actually depositing in that particular area.

Yes. And I'm going to follow up on that. It's a very, very good question. And I think we use a very small-bore needle. And so we reduced the AEs as much as possible. And with time, those AEs diminished or plateaued. But I will say this though, the delivery system or the platform that will be developed will be very, very complementary to this particular asset. And I think that the AEs, even with individuals' initial injections will drop off precipitously with a better delivery system. And so I think that is on the horizon. That really doesn't worry me very much at all as a practitioner, it's the AEs, [indiscernible] AEs that are very, very problematic with Kybella and with [ Cool ] and other products like that. This is not that product whatsoever. And I think with a really good platform, which is inevitable, it will make these AEs really disappear quite easily and very quickly with time.

Excellent. My follow-up question is related to Krystal. So given both this data and the data obviously from VYJUVEK in DEB, is there a thought to kind of a broader approach to collagenopathies where you can use this system to deliver various forms of collagens in other conditions where people are deficient in collagens, either genetically or kind of sporadically by age? Like how are you thinking about the kind of broader collagenopathy opportunity given these 2 drugs product profile debate?

Madhu, is this question specific to Ehlers-Danlos syndrome?

Or any other?

Or any other collagen disease?

I mean there's a whole swath of them. But yes, Ehlers-Danlos is an example for sure.

Okay. Bhushan start it and maybe Suma can chime in.

Yes, I mean, again, obviously, we have -- from a patent perspective, we are protected. We know that we can use this vector to introduce any kind of collagen to the skin. Again, there is a slew of different indications. We have to evaluate. We know that we can deliver intradermally through our vector. Now we have shown it twice, but through topical application if the skin is compromised for the DEB patients or with ichthyosis, again, with compromised skin, we can access the cells that we need to deliver the protein. I mean, again, we have internally discussed and looked at different indications, but this is something, again, in our research pipeline. But again, the potential is there. And I think every time we show that this is feasible with one of our indications with the same division, hopefully gets easier. We don't have to repeat, safety gets established. So the agency gets comfortable with it, and we don't even need to do as many tox studies for future indications. So there's a lot of clinical data that we can reference. So yes, we are looking at different indications and the more safety and the success of our technology is proven in the skin, I think it will get easier for us, too.

Our pipeline is in such a way that we take care of the full thickness of the skin depending upon the -- what gene we have. Like right now, we are focusing on the upper layer, but we are also focusing on extracellular matrix of around the adipose tissue. Because many times, it's not that you want to get rid of the fat, you just want that fat to be nicely compacted. And I think if we have collagen IV and collagen I, that will actually tighten that fat instead of being loose or you don't have to remove that fat many times. And I think that's a huge unmet need we have today. And I can see multiple indications for that particular product also. So the pipeline is primarily taking care of the skin at literally every level so that we can have multiple indications, either by one or combination or using 3 of them. So it will literally cover the whole thickness of the skin with multiple indications. And I think that is what excites me the most about this whole pipeline and the platform.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

So thanks, Dr. Yoelin. Thank you all for participating in the conference call. We're excited about the program and look forward to the next steps. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.